Bank Of America To Pay Out Mortgage Settlement

NEW YORK (AP) — Bank of America and its Countrywide unit will pay $8.5 billion to settle claims that the lenders sold poor-quality mortgage-backed securities that went sour when the housing market collapsed.

The deal, announced Wednesday, comes after a group of 22 investors demanded that the Charlotte, N.C. bank repurchase $47 billion in mortgages that its Countrywide unit sold to them in the form of bonds.

The group, which includes the Federal Reserve Bank of New York, Pimco Investment Management, and Blackrock Financial Management, argued that Countrywide enriched itself at the expense of investors by continuing to service bad loans while running up servicing fees.

Bank of America, which bought Countrywide in 2008 for $4 billion, has denied those claims.

Bank of America CEO Brian Moynihan said Wednesday that the settlement would minimize “future economic uncertainty” in the banking business and “clean up the mortgage issues largely stemming from our purchase of Countrywide.”

For several months, Bank of America battled claims based on estimates “that were much different from ours,” Moynihan said. But at this point, it made more sense to settle than to keep fighting, he said.

“We have said consistently if people are reasonable and can get to a reasonable assessment of their claims and it’s in the best interest of shareholders, we will settle,” Moynihan told Wall Street analysts in a conference call.

The settlement is subject to court approval and covers 530 trusts with original principal balance of $424 billion.

Citi analyst Keith Horowitz said the settlement, which amounts to only 2 percent of the original principal balance, removes one of the largest investor risks for Bank of America.

“We think this could prove to be a step forward” for Bank of America, Horowitz said. It would show investors that the bank can manage through crisis without raising additional capital.

As a result of the settlement, Bank of America put its second-quarter loss at $8.6 billion to $9.1 billion. Excluding the settlement and other charges, the bank expects to post a quarterly loss of $3.2 billion to $3.7 billion.

Shares of Bank of America Corp. jumped more than 4 percent, or 48 cents to $11.30 before the market opened, with investors happy that the bank can put very big uncertainty behind it.

Investors may now be more confident that they can get similar concessions from other major U.S. banks that created markets for mortgage-backed securities with questionable pedigrees.

Yet stocks in the financial sector were rising in electronic trading Wednesday, likely because the Bank of America deal presents a framework for others to follow.

This is what many are currently doing in America. WALKING AWAY… Forget your credit, it will be no good.. Who cares. Pay Cash and get your finances in order for the future. Regarding potential Deficiency Judgment from the lenders toward the homeowner(s)? Who cares, with all that’s on their plate, if they want to pursue you legally for the difference so be it, many lien holders are not and more than likely will never, plus there is a statute of limitations find out what it is in your state for lien holders to pursue Deficiency Judgment against homeowner(s). Make them (Lien Holders – BOA, WF, etc…) PROVE which (investors) actually OWN the NOTE to your home. If they cannot produce this, they cannot foreclose on your home legally. You can live in it without paying your mortgage.

UNREAL! WHOEVER SOLD THOSE BONDS SHOULD BE ARRESTED AND SENT TO JAIL FOR FRAUD. JUST THINK IF ONE OF USE SOLD A PRODUCT BY LYING ABOUT ITS PREFORMANCE? CRAZY. AND THE REPUBLICANS WANT GIVE THESE CROOKS TAX BREAKS FOR BEING RICH, WHILE THEY RAPE AMERICA.
I’M A HARD WORKING AVERAGE JOE, AND I PAY 3000 PER MONTH IN TAXES FROM MY PAY CHECK. I’M NOT COMPLAINING BECAUSE WE NEED SOCIAL SERVICES. HOWEVER, WHY MUST I PAY AND THE GUY/GAL WITH THE BILLIONS GETS A BREAK FOR OWNING A JET AND HAVING A 7 FIGURE CHECKING ACCOUNT. THAT’S WHAT I CALL DUMB REPUBLICAN MATH.

Bank of American is unbelivable, I have been dealling with them for three years trying to modifiy my loan. It’s almost like you have to go into de-fault before they will help at all. I am over 100k under on my property and BofA is doing nothing. I am also a ex Countrywide victim.